Determinants Of Import Demand For Ghana Essay

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The paper investigates the determinants of import demand for Ghana using a time series data from 1980 to 2013. An imperfect substitute approach was used in modelling the import demand function for Ghana. Amongst the key results it is found that Ghana’s import demand is positively and significantly affected by the level of exports, government spending and gross fixed capital formation. These three variables are the major determinants of Ghana’s imports. Relative prices and inflation showed a negative insignificant relationship. The study concluded that increasing the share of those components for which import demand elasticity is low and by reducing the share of those components for which import demand elasticity is high will help improve balance of payments.. For instance, monetary policy promoting saving and investment and fiscal policy providing incentives for domestic resource-based and export oriented industries will be useful. Exports of finished goods instead of primary or semi-finished commodities should be encouraged.

Keywords: Import demand, import substitution, Ghana

The importance of international trade in the development process has been of interest to development economists. In the recent years, because of the popularity of globalization, the interdependence among countries at the world level has increased. Every country wants to achieve rapid pace of economic development through getting the
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